The reputation of inflation targeting, which before the crisis was one of central banking’s sacred cows, has taken a bruising in recent years.
But Canada’s renewal this week of its 2 per cent target for the next five years would suggest that all was well – or at least broadly ok – with the framework.
Not so fast. Comments by Mark Carney, the governor of the Bank of Canada, highlight that if inflation targeting is to survive, then it will have to adapt.
But that could mean sacrificing some of its benefits. Read more